According to a recent article in the Wall Street Journal by Don Clark, the reasons for this market consolidation are relatively new to the industry: slowing growth and rising costs.

In the past, chip makers used acquisitions to obtain new technology. But, Clark writes that a different reason is becoming more prominent: “Many recent deals resemble consolidation waves in older industries, motivated mainly by trimming costs in areas like manufacturing, sales and engineering.”

For example, Avago projects that it can gain $750 million in annual savings starting in 2017 after it integrates Broadcom, according to Clark.

The article cites figures from Dealogic stating that the industry has seen $100.6 Billion in mergers and acquisitions in 2015 so far, compared to $37.7 Billion for all of 2014.

2 thoughts on “Historic era of consolidation for chip makers”

I would not say that slowing growth and rising costs are new pressures for the semiconductor industry per se

It seems that the interaction of technology challenges and scale needed to support technology and recover costs in anticipation of coming massive volume increases driven by Internet of things and other new applications is behind the consolidation.

Would also add that especially in the Analog space there is a massive shortage of skilled designers and operational expertise which some smaller scale companies are already constrained by.

Increasingly semiconductor companies are recognizing that the traditional chip business models are giving way to application solution models where value added propositions pivot around combinations of IP and software. This trend has already been driving acquisitions in large existing markets: smart phones, servers and enterprise storage, and will continue to thrive in the emerging IoT driverless auto markets.

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